Microcredit system empowered the poor across the world - Muhammad Yunus
The banking system has existed for centuries – revered by some, hated by many, yet still a vital part of modern economies. But this man managed to breathe a new life into it, giving a helping hand to those who need money most. The pioneer of the microfinance financial strategy that lifted millions out of poverty, Muhammad Yunus, is today’s guest on Sophie&Co.
SS: Our guest today is Muhammad Yunus, Nobel Peace Prize winner, the pioneer of microfinance – the financial strategy that’s lifted millions out of poverty. Mr. Yunus, first of all I will start by saying we’re really glad to have you on our program today. And I’m just going to go ahead and start with the question that all our viewers are asking. How soon can borrowers pay back their debt to your bank? Is there a risk being indebted for life to your bank, for example?
MY: In the bank, the time period to repay the loan is chosen by the borrower, so you can pay it back in one month, you can pay back in one year, six months, three months – whatever suits the sides, or two years, it’s flexible. Conventionally, within Grameen Bank, most of the borrowers like the annual cycle. Within one year in weekly installments you pay back your loan and then you borrow another one and continue to do that. And there is no question of getting into debt burden.
SS: But what happens if you cannot pay annually?
MY: It’s up to her. If she says, “I cannot pay back within 52 weeks of one year, I need a few weeks more,” we will reschedule it, as long as she wants to pay, we have no problem, we’re not here to punish her for a time period, we’re here to help her, so that she can use the money and earn enough money because this all is an income generating loan, in other words you invest in something which will generate income and you pay back the bank and you still have some money left for you out of your income. So, the time period is not a big concern for us, it’s up to you. And if you say, “Well, I’ll totally pay back in six months but then in the fifth month I find out that I’d need more time than six months,” you’ll say it and we’ll reschedule for another one, whatever number of months you need.Because after all, when you’re paying back we have no grudge against you or any other thing. We don’t want to make any problem for the borrowers, we’re not in a penalty mood for anybody. We’re not punishing anybody for anything. We want to be helpful for them, so they find it convenient; they find it helpful to deal with the bank.
SS:I know, your organization was originally created to help people, but what happens if your borrower cannot generate income after borrowing money?
MY: Sure, it’s possible that a business is failed – for example, a borrower took a loan to buy a cow and she [paid it off very well in the first month, but] in the third month the cow died, she cannot pay back anymore, so we don’t punish her for the death of a cow, we consult with her with the group members how best to help her. And they will say if they want, say, another loan will be happy to do that, so borrowers come back and say she wants to take a loan for another cow, so we’ll give another fresh loan. The old loan is never forgiven, it’s not wiped, it’s not written off, it’s still in the book but your main concern now is to pay back the second loan and then, on top of it, if you pay a little bit more, which will go in the first loan, that is fine with us. In practice, the first loan becomes a long-term loan. It doesn’t put a heavy burden on her but the second loan becomes a loan for another year or so. We try to solve the problem within our means, within our rules, so the rules should not be to punish her.
SS: The Grameen microfinance bank in itself is a huge institution. It is impossible to control all its activities personally. Surely, it’s possible that some bad practices could have occurred in the bank’s operations, no?
MY: Possible in the organization, you talk about government, you talk about big businesses. There are some people who’ll make wrong things, bad judgment and so on. It happens in the Grameen Bank also. But compared to any other big launched nationwide institution, I would say the Grameen Bank is almost free from those mistakes, insignificant number of mistakes happen and we try to rectify it and we try to it put in a system where you can detect any fault, any problem, that arises in the system, because that system is computerized so that you can check it right from your head office what’s going on in the remote villages and in the remote branches. We work it all over Bangladesh, every single village in Bangladesh has access to domain bank microcredit program, so we have borrowers all around the country, we have 8.5 million borrowers, 97 percent of them are women. They are all connected within our system. I should mention that the bank is owned by the borrower, so the borrower is not somebody outside this; she is in control, she is the borrower and she is the owner, and she sends a representative to sit in the board, whoever is making a decision is actually her representative and a borrower like her. So, it’s not something in some big banks when somebody came and give you a loan, and they don’t know you and you don’t know them, it’s not like that, it’s a family kind of thing, it’s 8.5 million women’s family. So, we work at it as a kind of organization to be with them and for them.
SS:It was reported recently that Gremeen’s model in South India has in recent years been distorted by venture capitalism, profit makers. Rural families may face debt spirals, forceful debt collections, which in some occasions have led to suicide. Are you aware of this?
MY: Yes, one thing I want to correct, it is not the Grameen model. If it is a Grameen model, it will not going to [raise finance through an] IPO and so on. We’re not in that business, we’re not here to make money out of our activity. So, they’ve deviated from the Grameen model, that’s why all the problems took place. They wanted to make it a money-making enterprise for shareholders, so they wanted to take the side of people saying, “If you lend money to the poor people, you can make a lot of money out of it.” I think that is totally opposite of the Grameen Bank system, the Grameen Bank system is to help poor people, poor women particularly, to change their life. And nobody is trying to make money out of them. Those who want to make money out of them by misusing the Grameen concept; they turn the whole thing into a loansharking direction. And we oppose to loansharking, that how we were born – opposing loan sharks. We don’t want microcredit or the Grameen Bank to be used to become a loan shark, that’s why we condemned it and we said it’s an entirely wrong thing, they shouldn’t even use the word “microcredit” for themselves, that’s for the loan of the Grameen Bank microcredit.
SS: You’re saying these kind of things don’t happen in Bangladesh, there are no families that have actually being worse off after borrowing money in Grameen than before…
MY: In Bangladesh there are many, many microcredit programs, including the Grameen Bank itself. None of them is devoted to making money for any individual person, any collection of shareholders. It’s all dedicated to serve the people. As I said in the Grameen Bank itself, it is owned by the Grameen Bank borrowers. So, the question of making money from the people doesn’t arise. In Bangladesh those kinds of deviations didn’t take place, it took place in India and Andhra Pradesh - the one that you’re mentioning. We condemned it very heavily, we wrote about it, we made press statements and wrote editorials about it. Similar thing happens in Latin America, particularly in Mexico through one of institutions there, and we condemned it too. They also wanted to make an IPO and get business people excited that “you can invest in microcredit and make a lot of the money out of the poor people,” which is a totally wrong message.
SS: Bangladesh’s prime minister, Sheikh Hasina, dismissed you from Grameen Bank in 2010, saying that you were older than the mandatory retirement age of 60. First of all, how painful was this decision for you? Did you retain some say in Grameen Bank after your retirement?
MY: As I said, it’s very painful because it was done in a kind of inconsiderate way, because we were not taken as a government bank, government applied the government bank rule onto Grameen Bank, saying that we‘re not following the Grameen Bank’s rules of retirement. We said this is a bank owned by poor women. We have our own rules, our law allows that, so this restriction about age limit doesn’t apply to Grameen Bank and our board is very clear on that. But in any case I was asked to resign, so I resigned and came out of it. But that doesn’t mean the whole Grameen Bank suddenly became a foreigner to me, this is a part of my life, this is a part of me, this is a part of my family, so I feel that I belong to the Grameen Bank family, whether I’m in a position of decision-making or executive position, or I’m not. This is my baby, I worked together and people who worked there is a part of my team, we always work together since is the very date it was born, when it was a little infant. We nurtured it and helped it to grow, and it has grown nationwide, and the Grameen idea has spread all over the world. I still go around and do that, that position has not changed, that relationship has not changed.
SS: So you’re someone like a senior consultant to the bank now without really having real power in meddling in its affairs, right?
MY: I would not say, these words sound very commercial. My relationship is not a commercial relationship, I’m just a friend. I would say I’m a friend, I would still feel as part of the team. I don’t hold a position within the bank - that doesn’t mean my views are ignored within Grameen Bank because they look up to me, because they know that every single procedure, every single methodology within the Grameen Bank – I’ve built them piece by piece, so they look up to me for guidance.
SS: So, just to talk a little bit more about what happened with Grameen Bank and you. Prime Minister Hasina wanted to split the bank into 19 groups, you rejected that idea, which probably also played a part in your downfall. On top of that, the Bangladeshi government has this idea to actually bring Grameen Bank under the Central Bank’s jurisdiction. What’s wrong with all of that?
MY: Well, this all came for political reasons; there is no complete issue about that. I mean, by dividing up and splitting up the Grameen Bank in 19 pieces only – you’ll destroy the bank. If somebody wants to destroy the bank, that’s the best way to do this – cut it up, chop it off and it’s gone. That idea was dismissed by government as it is not in favor of chopping it off, they would rather do something else. But in any case behind everything else it looks like there is an attempt to control Grameen Bank. And the law that we started out with makes it very clear that it should be guided by its own board. A board is ultimate decision-making body. But the present government somehow didn’t like that, so they want to intervene into the activities of Grameen Bank. And that’s why all these 19 pieces and all control mechanisms, and changing the law, amending the law to intrude into the bank – all these things came about. And this seems to be not very friendly to the bank itself and any action that is being taken, and nobody in the world will say that it is in the interest of the bank or the poor people. I’m very worried about it and I try to draw attention of everybody, every sane person that, look, you have to stop that, this is a great institution, this brings so much good for the people, particularly poor families and poor women in the world. That has given so much empowerment to the women in Bangladesh and that is becoming a global phenomenon, bringing the same thing in many, many countries. Almost every single country, including Russia, has microcredit programs. So, today, to go back to the origin of that whole idea, Grameen Bank, and to harm it – it will be totally painful and unacceptable.
SS: Bangladesh’s government has launched legal actions against you for overseas tax evasion. You were ousted from being boss of Grameen Bank, for working past retirement age, the Finance Minister alleges you have wrongly received tax exemptions, while being a chief of a public institution between 2004 and 2011…a lot of accusations in a very short period of time. Where are they coming from? And why now?
MY: Now? Because the present government finds it appropriate for them to do it for political reasons. All the allegations that you have listed, again and again have been demonstrated, we sent all the information to the public to make sure that they understand it’s all baseless, there is no ground for it. For example, the case of tax evasion, it was decided in the cabinet meeting that my tax information should be examined by the tax authorities and that report should be submitted to the cabinet itself, the cabinet of ministers. They did that, they said we’ve investigated every detail, so Professor Yunus has tax returns and if he did everything correctly, we have no problem, we have not missed any single penny in taxes, so we have no problem with that. But the cabinet was not satisfied with that report, they sent it back again to make more inquires so that they can find something else. This is a kind of thing, tax authorities keep coming back and in the final report tax states as well: “Only one thing we can say, that probably he didn’t ask for permission to make this income, to go to foreign countries and make speeches and accept honorarium for them. He needed [this] under government law, he needed permission.”
Then our position is that it was never a government bank, so the question of taking permission has never arose and a board never felt that I need permission from the government. Then government itself is saying that since by 2000 I became 60 years old, after that I’m no longer a valid managing director. All this information that government is seeking about this context is after 2000. So, if I’m not a government servant – according to them that I was not the government servant after 2000 - the question of taking permission from the government doesn’t arise at all. So again, it makes no sense. Every single one of them have said that I’ve just transferred a lot of money from Grameen Bank to my private organization, private companies - and I made it very clear to the people in Bangladesh, that not only I don’t have private organization of my own, I don’t own any single share in any company anywhere. The question of me owning anything doesn’t arise because I don’t own anything. That is very clear. The question of transferring money to my organization doesn’t arise. Then they I said, you’ve transferred money to another Grameen organization – yes, I did, because that was the requirement of the agreement between the donor organization and Grameen Bank. The Norwegian authority, whose money was involved in that- Mr. Erik Solheim, Development Minister - he made a very clear statement that whatever was done, was done legitimately, there was nothing wrong in doing it. So he made it clear too.So there’s no basis behind those accusations, and about 60, and the retirement, etc.
SS:It does look like that the government just wants you out of the picture. I’m justtrying to figure out why. Do you represent some kind of threat to them?
MY: You can make speculations, I mean the press makes up a lot of speculation and anybody is entitled to speculation, but definitely nothing of that thing that has done looks rational to anybody in the world, both within Bangladesh and outside Bangladesh. Many people, many leaders around the world protested against what is happening to Grameen Bank, and many people inside Bangladesh protested, even the opposition in Bangladesh today which is very powerful opposition. They said everything this current government is doing with the Grameen Bank, if the opposition comes to power, they will undo everything they have done because they have done it so wrongly, so badly, so they will do that. Nobody has supported this cause at all…and the borrowers of Grameen Bank, who are the owners of Grameen Bank.
SS:I know that you have been an outspoken critic of successive governments in Bangladesh, not just this particular government. Plus, like you said, you have 8.3 million borrowers. That also constitutes some political force on its own in Bangladesh? It’s a lot of people.
MY: That’s another explanation. This said that probably government sees a political benefit in controlling Grameen Bank, so they can get some political mileage. Again, this is speculation. I cannot say whether this is true or not. But it’s a fact, that’s an organization which is about 1/4 of the total population of Bangladesh - is within Grameen Bank’s area. So we are linked to that 1/4 of the population, which means 1/4 of the voters are included within the Grameen Bank. Definitely, politicians could look into it in that way to their favor. Again, as the same logic you may say then government should be friendly to the Grameen Bank, rather than confronting the Grameen Bank. That doesn’t make sense. Why do irritate all these people who are in the Grameen Bank by taking away their rights. When you’re taking their rights they won’t be your friend, they will oppose you. So, politically it doesn’t look like very sane step on the part of the government.
SS: People in Bangladesh saying that you are someone of a hero, plus you disagree with many of the things this government was doing. Why don’t you run for presidency yourself?
MY: Well, I don’t want to be in politics. That I’ve made it very clear again and again in 2007, when there was a vacuum, political vacuum, many people in Bangladesh tried to persuade me to join politics. That time under pressure I said OK, I’ll join politics and I’ll create a political party. But within ten weeks I came back and said I’m not going to join politics and I’m not going to create a political party. Since then I’ve even never thought about joining politics or creating a political party of my own. And I told whatever I’m doing is so much important that I do concentrate on that. If you get into politics, and Bangladesh politics is not such an exciting life in terms of corruption, in terms of environment of politics, I thought this is not the kind of environment I can work with. I work in a way where I see transparency, where I feel comfortable, and I don’t feel that much comfortable at other sites. I want to stay away from that.
SS:How will the possible demise of Grameen Bank in Bangladesh affect its followers all around the world?
MY: First of all, I don’t think there will be the demise of Grameen Bank, there will be damage to the Grameen Bank, not demise of the Grameen Bank. Grameen Bank is a very well established organization; it’s a very strong organization, financially strong organization, institutionally very strong organization. I don’t think anybody can bring demise to it. But lots of harm in a short time can be done, and then our job, meaning my job, my colleagues, that team that built Grameen Bank, and the borrowers themselves, is just to go back and fix it and make sure that it’ll become not only strong, it’ll become a stronger organization. I’m sure, we will get support from the public, we will get global support, and our supporters and our admirers around the world will be proud of us.
SS: Our guest was Nobel Prize winner and pioneer of microfinance, Bangladeshi economist Muhammad Yunus. Thank you for watching and tune in for the next edition of Sophie & Co.